How lenders decide your credit limit

You ask for $250,000 and are offered $60,000. It feels arbitrary. It is not, and understanding the arithmetic tells you what to change.

The starting point is your deposits

Most working capital lenders size a facility against revenue, usually expressed as a proportion of average monthly deposits over a recent window. That is the anchor. Everything after it is adjustment.

Which means the first thing to check is whether your deposits actually reflect your revenue. Businesses that run income through multiple accounts, take significant payment outside the main account, or bank irregularly routinely look smaller than they are. That is a documentation problem, not a credit problem, and it is fixable.

Then the adjustments

• Debt service coverage. Existing loan payments come off the available capacity first. A business already carrying significant debt has less room regardless of revenue.
• Time in business. Under two years compresses the limit almost everywhere. Under six months rules out most conventional facilities entirely.
• Personal credit. For a small business this moves both approval and size, because you are guaranteeing it.
• Industry. Some sectors carry restrictions no amount of revenue overcomes, and knowing that in advance saves wasted applications.
• Volatility. Even revenue is treated more generously than the same annual total arriving in violent swings.
• Collateral. A secured facility is generally sized larger than an unsecured one.

Why growing businesses get squeezed

There is a trap here worth naming, and Jerome and Twin Falls are full of it. A carrier or supplier growing fast has cash tied up in receivables, which makes the bank balance look thin. The limit is sized off that thin picture. But the reason it is thin is the growth the credit was meant to fund.

This is precisely where invoice factoring earns its cost. It is sized against your invoices rather than your balance sheet, so it scales with the growth instead of being capped by its symptoms. Expensive compared with a bank line; frequently the only thing that actually fits.

What moves the number

1. Run all revenue through one business account, consistently, for several months before applying.
2. Clear or consolidate small debts. Each one consumes coverage out of proportion to its size.
3. Apply after your strongest months rather than your weakest.
4. Offer collateral if you have it and are comfortable committing it.
5. Improve personal credit first if it is the binding constraint — a few months of work often changes the answer more than anything else on this list.

A word on asking for too much

Requesting a figure far above what your revenue supports does not anchor the negotiation upward. It reads as a business that has not done the arithmetic, and it can affect how the whole file is received. Ask for something defensible and grow it — increases on a well-managed facility are routine, and far easier than a first approval.